Rental expenses for house-parent at boarding school

Can the taxpayer claim a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for their rental expenses incurred while boarding at work?

Yes. The taxpayer can claim a deduction under section 8-1 of the ITAA 1997 for their rental expenses incurred while boarding at work as the taxpayer's employer requires the taxpayer to reside away from home for periods of time and thus the expense is employment related.

The taxpayer is employed as a boarding school house-parent.

The taxpayer is required by their employer to reside at the school in accommodation provided by the school during the school week. This is to ensure the overnight security, safety and well-being of students who board at the school.

The school provides the taxpayer with accommodation for which the taxpayer is charged rent.

The taxpayer returns to their own home on their days off and occasionally visits their home during the school week.

Section 8-1 of the ITAA 1997 allows a deduction for all losses or outgoings to the extent to which they are incurred in gaining or producing assessable income, except where the outgoings are of a capital, private or domestic nature.

As a general rule, the cost of accommodation is not tax deductible, as it is essentially a living expense which is considered to be a private or domestic outgoing ( FC of T v. Green (1950) 81 CLR 313).

However, where a taxpayer is required by his or her employer to reside for periods of time, away from home and at the work site, and that employee incurs expenditure for the cost of sustenance, the expense takes on the character of being business or employment related ( Roads and Traffic Authority of NSW v. FC of T 93 ATC 4508; (1993) 26 ATR 76).

In FC of T v. Charlton 84 ATC 4415; 15 ATR 711, Crockett J expressed the opinion that in order for accommodation expenses to be deductible, there must be something in the nature of the work that demands the taxpayer stay in the accommodation.

The taxpayer's duties and terms of employment require the taxpayer to remain at the school during school weeknights. The nature of the taxpayer's employment demands the taxpayer stay in the accommodation. The taxpayer maintains their own home and spends their time away from work at their private home.

The taxpayer is required by their employer to reside away from home for periods of time. The taxpayer incurs rental expenses as a result of this requirement. As the nature of the taxpayer's employment demands the taxpayer stay in the particular accommodation, the rental expense is employment related in character.

Accordingly, the taxpayer can claim a deduction under section 8-1 of the ITAA 1997 for rental expenses incurred while staying at the boarding school.

Date of Amendment Part Comment 27 March 2015 Reasons for Decision Update reference to FC of T v Charlton 84 ATC 4415 (Replaced 88 with 84).

Date of Amendment | Part | Comment

27 March 2015 | Reasons for Decision | Update reference to FC of T v Charlton 84 ATC 4415 (Replaced 88 with 84).